USD/CNH targets 6.55 area

The ramping up of trade sanctions has had a ripple effect across the asset classes, including FX, warns George Davis, Chief FIC Technical Analyst at RBC Capital Markets.

Davis says that fears of a global trade war have led to the underperformance of emerging market currencies relative to developed markets (Chart 1), and that Latin American currencies are feeling the brunt of the worries (Chart 2).

The trend can also be seen in USD/CNH which Davis says has completed a bullish trend reversal that involved breaking above an old triple bottom at 6.4753 (Chart 3). He says the next target is 6.5239, the 38.2% retracement, followed by 6.5453 and 6.5684.